High value single assets – not necessarily in London – during any property cycle typically appreciate the most quickly and are then first to come under pressure.
Whenever there is a suggestion of perceived lack of liquidity and overseas investment, values at the top end are put under pressure.
City centres attract blue chip global companies and senior employees.
They also attract foreign money as investors without the time or inclination to scour hotspots in the UK look to acquire stock in prominent areas, therefore the focus on high profile locations such as London, Manchester and Leeds continues.
A high proportion of our clients focus on areas they have a thorough knowledge of and have typically carried out extensive research around.
This inevitably leads them towards value-for-money purchases where there is good potential for increase in values post refurbishment or strong yields if they retain.
The impact for BFS therefore on price corrections is negligible, although there will undoubtedly be a weakening of appetite among buyers who realise the market is more ‘top end’ the closer you get to a city centre.
Pressure on buy-to-let
The inevitable knock-on effect of falling property values comes on the buy-to-let market where we have seen a number of lenders tighten up on loan repayment ratios and calculations.
This is making it more difficult in some circumstances where yields are being diminished by capital values.
For BFS we typically start each potential bridge at the end, so we try to create as much certainty as possible that a client can re-finance within their proposed timescales and repay us—to do otherwise would be unprofessional.
Knowledge and research essential
In summary, knowledge and thorough research are the two elements that have remained a consistent ingredient for all property investors, both new and old.
The ability to source property that is reasonably priced, in areas where there is potential for demand, yield and capital growth, is a well-trodden path.
Get this right and an investor will ride out any storm that the property market can uncover, but get it wrong and they can be backed into a corner quickly as the market hardens.